Question

1. Discuss the various ways in which government can control power of monopoly. (7marks)

2. my subject is economics

Answer 1

1. Control prices- Monopolies tend to charge prices above the competitive level. This harms the consumers and leads to deadweight loss in the society. So government needs to control the prices.

2. Promote competition- Government can encourage new firms to enter the market in order to reduce the monopolist market share and bring in competition.

3. Ensure quality of goods and services- A monopolist tends to produce differentiated good at a higher price thus tend to have little incentive to provide optimal quality. This can be ensured by government regulations.

4. Regulating natural monopolies- Natural monopolies have economies of scale and are thus difficult to regulate. So government intervention is necessary.

5. Anti trust legislation= Government can control monopoly power by setting up anti trust legislations.

6. Consumer associations= Organised consumer associations keeps a check on the malpractices of the monopolists as well as inform the government about it.

7. Public supervision of monopoly houses= Monopolists tend to have certain irregularities and ineffective methods of production which tends to get away from the notice of the common people. So regular monitoring of monopoly houses will tend to keep a check on the monopoly power.